Paraguay -- Stablecoin Regulations Regulatory Overview

The regulatory framework for stablecoins in Paraguay is still evolving and is primarily encompassed within broader virtual asset regulations, rather than having highly specific rules solely for stablecoins. Paraguay has adopted a general framework for virtual assets and virtual asset service providers (VASPs) through Law No. 6977/2022 "Que crea la Superintendencia de Activos Virtuales y regula los activos virtuales" (Law that creates the Superintendence of Virtual Assets and regulates Virtual Assets), which came into effect in December 2022.

Here's a breakdown of the framework based on your specific points:

Regulatory Framework for Stablecoins in Paraguay

1. Classification of Stablecoins:

• General Classification (Primary): Stablecoins generally fall under the definition of "Virtual Assets" (Activos Virtuales) as per Law No. 6977/2022.
  • Article 3 of Law 6977 defines "Virtual Asset" as: "A digital representation of value or rights that can be digitally transferred, stored, or traded, and that is accepted by natural or legal persons as a means of exchange or investment, but does not constitute legal tender issued by a central bank or public authority." Stablecoins, by their nature, fit this broad definition.
• E-money/Payment Tokens: The Banco Central del Paraguay (BCP) has generally maintained a cautious stance. As of now, stablecoins are not officially classified as e-money or payment tokens under the existing financial services or payment systems laws (such as Law No. 5476/2015 "De Pagos Electrónicos").
  • The BCP has emphasized that it does not recognize virtual assets, including stablecoins, as legal tender or as instruments under its direct supervision from a monetary policy perspective, unless they are issued by regulated financial institutions under specific circumstances that would bring them within the scope of traditional financial regulation.
  • If a stablecoin were to function as a substitute for fiat currency within a closed payment system and be issued by a regulated financial entity, the BCP would likely assert its authority under existing laws governing electronic payments and financial services. However, this is not the current general classification for most public stablecoins.
• Securities: A stablecoin could potentially be classified as a security if it meets the criteria of a security under Law No. 5810/2017 "Del Mercado de Valores" (Capital Markets Law), particularly if it represents an ownership interest, a debt instrument, or offers a reasonable expectation of profit derived from the efforts of others. This is a case-by-case assessment by the Comisión Nacional de Valores (CNV). However, for most common stablecoins (e.g., USD-pegged collateralized stablecoins), this classification is less likely unless they have additional features that make them investment contracts.

2. Reserve Requirements:

• No specific reserve requirements are mandated directly by Law No. 6977/2022 for virtual assets, including stablecoins, as a distinct asset class.
• However, if a stablecoin issuer were to be classified as a regulated financial institution (e.g., if it started operating as an e-money issuer under BCP supervision), then it would be subject to the capital, liquidity, and potentially reserve requirements applicable to those entities under the Organic Charter of the BCP (Law No. 489/1995) and related BCP regulations (e.g., Resolución No. 1, Acta No. 68 del 22 de setiembre de 2021, "Reglamento para la Emisión y Operación de Medios de Pago Electrónicos").
• For VASPs offering stablecoins, Law 6977 mandates certain capital requirements and guarantees to be determined by the regulating authority (Ministry of Industry and Commerce), but these are operational requirements, not specifically asset-backing reserves for stablecoins themselves.

3. Issuer Licensing:

• Law No. 6977/2022 requires all "Virtual Asset Service Providers" (Proveedores de Servicios de Activos Virtuales - PSAVs or VASPs) to be licensed.
• An entity issuing a stablecoin would likely fall under the definition of a VASP, especially if it engages in activities such as:
  • Exchange between virtual assets and fiat currencies.
  • Exchange between one or more forms of virtual assets.
  • Transfer of virtual assets.
  • Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets.
  • Participation in and provision of financial services related to an issuer's offer and/or sale of a virtual asset.
• The licensing process involves the Ministry of Industry and Commerce (MIC), which is designated as the primary regulating authority for virtual assets. Additionally, VASPs must register with the Secretaría de Prevención de Lavado de Dinero o Bienes (SEPRELAD), Paraguay's anti-money laundering and combating the financing of terrorism (AML/CFT) authority.
• Requirements for VASP Licensing (under Law 6977):
  • Legal incorporation in Paraguay.
  • Minimum capital requirements (to be defined by regulation).
  • Guarantees to cover operational risks.
  • Demonstration of technical capacity, cybersecurity measures, and compliance with AML/CFT regulations.
  • Fit and proper criteria for administrators and owners.

4. Redemption Rights:

• No specific statutory redemption rights for stablecoins are established under Paraguayan law.
• Redemption rights would primarily be governed by the contractual agreements and terms and conditions set forth by the stablecoin issuer.
• General consumer protection laws, such as Law No. 1334/1998 "De Defensa del Consumidor y del Usuario" (Consumer and User Defense Law), could provide a framework for disputes if an issuer fails to honor its stated redemption policy, particularly in cases of fraud or misleading advertising. However, these laws are not specific to stablecoins.

5. Algorithmic Stablecoin Rules:

• No specific rules or prohibitions are in place for algorithmic stablecoins. They are treated simply as another form of "Virtual Asset" under Law No. 6977/2022.
• The inherent risks associated with algorithmic stablecoins (e.g., de-pegging, volatility) are not directly addressed through separate regulatory provisions. However, the general obligations of VASPs regarding transparency, risk disclosure to clients, and operational stability would apply, and regulators are likely monitoring developments.

6. CBDC Interaction:

• The Banco Central del Paraguay (BCP) has publicly stated its interest and ongoing studies into the potential issuance of a Central Bank Digital Currency (CBDC).
• While there is no immediate interaction or conflict, the eventual introduction of a sovereign digital currency could significantly influence the regulatory landscape for private stablecoins. A BCP-issued CBDC would be legal tender, potentially offering a more stable and regulated digital alternative, which might lead to:
  • Increased scrutiny or stricter requirements for private stablecoins to ensure financial stability and consumer protection.
  • A clearer distinction between sovereign digital currency and private virtual assets.
  • Potential for private stablecoins to integrate with a CBDC infrastructure or face competition.
• The BCP's current stance on stablecoins (not legal tender, generally not e-money) is partly informed by its mandate to maintain monetary stability and its ongoing exploration of a CBDC.

Specific Legislation and Regulatory References

1. Law No. 6977/2022 "Que crea la Superintendencia de Activos Virtuales y regula los activos virtuales":

   • Reference: Gaceta Oficial, Ley Nº 6977/2022.
   • URL: Ley N° 6977 / QUE CREA LA SUPERINTENDENCIA DE ACTIVOS VIRTUALES Y REGULA LOS ACTIVOS VIRTUALES (Official Government Gazette of Paraguay)

2. Law No. 5810/2017 "Del Mercado de Valores" (Capital Markets Law):

   • Reference: Gaceta Oficial, Ley Nº 5810/2017.
   • URL: Ley N° 5810 / DEL MERCADO DE VALORES (Official Government Gazette of Paraguay)

3. Law No. 5476/2015 "De Pagos Electrónicos":

   • Reference: Gaceta Oficial, Ley Nº 5476/2015.
   • URL: Ley N° 5476 / DE PAGOS ELECTRÓNICOS (Official Government Gazette of Paraguay)

4. Organic Charter of the Banco Central del Paraguay (Law No. 489/1995):

   • Reference: Gaceta Oficial, Ley Nº 489/1995.
   • URL: Ley N° 489 / ORGANICA DEL BANCO CENTRAL DEL PARAGUAY (Official Government Gazette of Paraguay)

5. Law No. 1334/1998 "De Defensa del Consumidor y del Usuario":

   • Reference: Gaceta Oficial, Ley Nº 1334/1998.
   • URL: Ley N° 1334 / DE DEFENSA DEL CONSUMIDOR Y DEL USUARIO (Official Government Gazette of Paraguay)

6. SEPRELAD (Secretaría de Prevención de Lavado de Dinero o Bienes):

   • Official website where regulations and resolutions related to AML/CFT for VASPs are published.
   • URL: SEPRELAD - Resoluciones

7. Banco Central del Paraguay (BCP) statements on virtual assets and CBDC:

   • The BCP frequently publishes press releases and reports on its official website regarding virtual assets and its CBDC studies. While specific resolutions might be hard to link directly without a specific search, the BCP's position is consistently outlined in official communications.
   • URL: Banco Central del Paraguay - Comunicados and Informes y Publicaciones

Note: The regulatory landscape for virtual assets is dynamic. While Law 6977/2022 provides the foundational framework, implementing regulations (decrees, resolutions) from the Ministry of Industry and Commerce, SEPRELAD, and potentially the BCP are expected to provide more detailed rules for stablecoins and VASPs. Therefore, continuous monitoring of these authorities' publications is crucial.